370 U.S. 294, 305, 82 S.Ct. 1502, 1513, 8 L.Ed.2d 510 (1962)
In November 1955 the United States filed a civil action in the United States District Court for the Eastern District of Missouri against Brown Shoe Company, Inc., and the G. R. Kinney Company, Inc., alleging that a proposed merger between the two companies through an exchange of stock would violate section 7 of the Clayton Act.1
A motion for a preliminary injunction was denied, and the companies were permitted to merge on May 1, 1956, on the condition that their businesses be operated separately and their assets kept separately identifiable.2 Brown was the third largest seller of shoes by dollar volume in the United States, a leading manufacturer of men's, women's, and children's shoes, and a retailer with over 1,230 owned, operated, or controlled retail outlets.3 Kinney was the eighth largest company by dollar volume among those primarily engaged in selling shoes, itself a manufacturer, and a retailer with over 350 retail outlets.4
The District Court found that the lines of commerce were men's, women's, and children's shoes separately and that the geographic markets for retailing were cities of 10,000 or more population and their immediate surrounding areas in which both a Kinney store and a Brown store were located.56 The court rejected the claim that the merger would substantially lessen competition in manufacturing for the national wholesale market but found that the merger would substantially lessen competition by foreclosing other manufacturers from Kinney's retail outlets and by lessening competition in retail sales in the specified cities.7
The shoe industry exhibited a trend toward vertical integration in which large manufacturers acquired retail outlets between 1945 and 1956, and the number of independent manufacturers declined from 1,077 in 1947 to 970 in 1954.89 Brown had acquired several retail operations including Wohl Shoe Company in 1951 and Regal Shoe Corporation in 1954, after which the acquired companies increased their purchases of Brown shoes.1011 Kinney operated over 400 family-style shoe stores in more than 270 cities and four manufacturing plants whose output was 0.5 percent of national production in 1955.1213
The District Court ordered Brown to divest itself completely of all interests in Kinney, to operate Kinney as an independent concern pending divestiture, and to file a plan for carrying out the divestiture within 90 days while retaining jurisdiction to supervise implementation.14 Brown filed a notice of appeal in the District Court and a jurisdictional statement in the Supreme Court, which noted probable jurisdiction after the Government moved for summary affirmance.15
Whether the District Court's judgment ordering divestiture but reserving formulation of the specific plan is final and appealable under the Expediting Act?16
Under the Expediting Act, 15 U.S.C. § 29, a direct appeal lies from the final judgment of the district court in civil antitrust actions brought by the United States.17
Yes. The District Court disposed of the entire complaint filed by the Government by ordering Brown to divest itself completely of all interests in Kinney, permanently enjoining further acquisition of interests in Kinney, and retaining jurisdiction only to supervise implementation of the divestiture plan.18 The parties litigated the propriety of divestiture on an all-or-nothing basis, and further proceedings will be independent of and subordinate to the issues presented on appeal.19
The judgment is final and appealable under the Expediting Act.20
Related opinions on this issue
Justice Harlan dissented from the holding that the judgment was final and appealable under the Expediting Act.21 He argued that the District Court's reservation of the determination of the precise terms of the divestiture for future hearings meant the decree was not yet final.22
Harlan contended that taking jurisdiction would pave the way for dual appeals in government antitrust cases involving intricate divestiture judgments, contrary to the Act's purpose of speedy disposition.23
Whether the lines of commerce for assessing the merger are men's shoes, women's shoes, and children's shoes?24
Section 7 of the Clayton Act prohibits mergers that may substantially lessen competition in any line of commerce.25 The outer boundaries of a product market are determined by reasonable interchangeability of use or cross-elasticity of demand, but well-defined submarkets may constitute separate lines of commerce when supported by practical indicia such as industry recognition, separate production facilities, distinct characteristics, and distinct customers.26
Yes. The District Court correctly identified men's, women's, and children's shoes as the lines of commerce because each is recognized by the industry and public, manufactured in separate factories, possesses characteristics rendering it generally noncompetitive with the others, and is directed toward a distinct class of customers.27 Brown and Kinney both manufacture and sell substantial quantities across these categories. Finer age or sex distinctions would be impractical and yield no different competitive analysis.28
The lines of commerce are men's shoes, women's shoes, and children's shoes.29
Related opinions on this issue
Justice Harlan concurred in the judgment affirming the District Court but would have defined the line of commerce more broadly as the complete wearing-apparel shoe market.30 He emphasized the production flexibility that allows plants to shift among grades and styles of shoes without undue difficulty.31
This flexibility, Harlan reasoned, provides a more realistic gauge of the possible anticompetitive effects of the merger than compartmentalization according to customer age and sex.32
Whether the geographic market for the vertical aspects of the merger is the nation as a whole?33
For vertical aspects of a merger, the geographic market is the area of effective competition in which the anticompetitive effects are to be measured, determined by reference to the relationships of product value, bulk, weight, and consumer demand that enable nationwide distribution.34
Yes. The District Court and parties agreed that the geographic market for the vertical aspects is the entire nation because manufacturers such as Brown and Kinney distribute shoes on a nationwide basis. The relationships of product value, bulk, weight, and consumer demand permit such distribution.35
The geographic market for the vertical aspects of the merger is the nation as a whole.36
Whether the merger may substantially lessen competition in the manufacturers' distribution of shoes through Kinney's retail outlets?37
A vertical merger violates section 7 when its effect may be substantially to lessen competition by foreclosing competitors of the supplier from a share of the market otherwise open to them.38 Relevant factors include the size of the market share foreclosed, the nature and purpose of the arrangement, trends toward concentration in the industry, and the absence of countervailing competitive advantages.39
Yes. The merger forecloses other manufacturers from a substantial share of the market represented by Kinney's more than 350 retail outlets whose annual sales exceed $42,000,000.40 Brown, already a moving factor in the industry's trend toward vertical integration through prior acquisitions such as Wohl and Regal, would use its ownership to force Brown shoes into Kinney stores. This conclusion is evidenced by increased purchases after earlier acquisitions and Brown's stated policy.41
The industry trend of manufacturers acquiring outlets and supplying an increasing percentage of those outlets' needs, combined with the decline in independent manufacturers from 1,077 in 1947 to 970 in 1954, supports the probability of substantial lessening of competition.42
The merger may substantially lessen competition in the manufacturers' distribution of shoes through Kinney's retail outlets.43
Whether the merger may substantially lessen competition in the retail sale of men's, women's, and children's shoes in cities of 10,000 or more population where both Brown and Kinney operate stores?44
A horizontal merger violates section 7 when its effect may be substantially to lessen competition in any section of the country.45 Factors include the market shares controlled by the merging companies, the number and size of competitors in the market, trends toward concentration, and the elimination of direct competition between the parties.46
Yes. In 118 cities the combined shares of Brown and Kinney in at least one line exceeded 5 percent. In 32 cities their combined share of women's shoes exceeded 20 percent, with some reaching over 57 percent.47 The merger eliminates direct competition between Brown and Kinney in those cities.
It creates a large national chain integrated with manufacturing that can insulate outlets from local competition and market shoes at lower margins. The merger accelerates the trend toward concentration in a fragmented industry where control of substantial shares by a large chain adversely affects independent retailers.48
The merger may substantially lessen competition in the retail sale of men's, women's, and children's shoes in the specified cities.49